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May 29, 2020  —  Volume 3, No. 14

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Tax Master Network Briefs

Pricing Lessons From George Carlin



Comedian George Carlin is best known for his Seven Dirty Words You Can't Say on Television. (In case you've forgotten, they're censored, deleted, can't say them here either). But Carlin's work is full of bits and bon mots that shine light on continued existence in this time of political turmoil and coronavirus. I've been thinking a lot about one in particular: "Think of how stupid the average person is, then realize half of them are stupider than that." (Don't ask me why I've been thinking about it so much.)


A quote like that opens the doors to all sorts of possibilities. But I want to focus today on pricing. I spend at least a few minutes every day on our TMN Facebook group, and several other accounting and tax groups as well. Pricing is a constant topic: people appear, ask how much they "should" price a particular service, and go on their merry way. They're always looking for the "average" price because they're afraid of charging too much. And that, as George Carlin would say, is stupid.


Here's the thing about averages. As Carlin points out, half of people are below average — in his case, stupider than that. But there's a flip side to that cynical math. Half of people are smarter than that, too. Hopefully at least a few of those smarter ones are doing things like shaping our response to the pandemic, pulling the economy out of the medically-induced coma we put it in back in March, and doing the rest of the things we need to do to get life back on track.


The same holds true with pricing. You may be like the nervous sheeple heading to the online groups to make sure they don't price anything "above average." But why is that a bad thing? By definition, half of people in any given market charge more than average. Half! That's a lot! And their clients aren't all running away, price-shopping, or looking for another provider just because they're paying more. Most of them are perfectly content with the fees they're paying.


Some clients even like paying higher fees because it makes them feel good about the value they're getting, or even about their own ability to afford those fees. It's the same logic behind showing off a Rolex because everyone knows it's an expensive watch. Wouldn't you rather do business with people who seek out prices that flatter their egos like that, and not grubby cheapskates looking for below-average fees?


How far can you go from "average" before you have to start worrying? Well, basic statistics tell us that in most samples, 34% of vendors fall within one standard deviation above average. 13.6% fall between one and two standard deviations above average. And 2.1% will fall between two and three standard deviations above average. Clearly they aren't letting fear dictate their pricing! They're also making more money (and probably doing less work) than anyone heading to Facebook to make sure they aren't charging "too much."


Why am I writing this now? Coronavirus is upending lots of clients right now, and many won't survive. They're looking to cut costs everywhere, and that may include with you. On nearly every Wednesday Business Development Call, someone asks the group if they're feeling pressure on fees. But that raises the follow-up question: if there is pressure on fees, what should you do about it? If you're still delivering above-average value — which every TMN member does — then you should still be charging above-average fees. Let your average competitors worry about crafting pandemic discounts and specials. If you're not average, then you shouldn't even care what the average fee is.


You're not really just "average" — are you?

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Tax Master Network Briefs:

Vol. 3, Number 16;

May 29, 2020


Pricing Lessons From George Carlin


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Edward A. Lyon, JD,


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Wednesday, June 3rd at 1:00 pm Eastern (10:00 am Pacific)
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